The Pensions crusader who backs sweet reason with steel

WORRIED about your pension? You should be. Pensions are the burning issue of the day. Is yours safe? Will it support you in your old age? These concerns affect us all, so it is of some comfort to know that they are being zealously tackled by the National Association of Pension Funds, which speaks for the vast majority of the country's occupational pension schemes.

The giant pension funds it represents wield massive power through their £700bn holdings in our major companies.

If you fear the NAPF sounds remote and impersonal, be reassured. It is headed by a strong-willed woman who has one of the most important jobs in Britain today and intends to keep pensions high on the political agenda.

Christine Farnish, 52, became chief executive three months ago as pensions and their dwindling value hit the headlines. Confident and attractive, she considers herself 'entrepreneurial' despite a career in public service. It seems no coincidence that since her arrival at the organisation's bleak offices in Westminster, the tone of its directives has become more forceful and assertive. Pensions and corporate governance are top priorities and Farnish is not ducking the issues.

Suddenly, the NAPF is urging part-time directors - for so long over-paid doormats - to be 'whistle-blowers' and bite the hand that feeds them if they suspect corporate wrongdoing. Such rhetoric would have been unheard of even a short time ago. Is Farnish making an early impact?

'It is not just me. The mood and climate has changed, people need informed and honest direction from the top. They want information they can trust. That has become more important because of scandals at large companies. It is partly because of the change in climate that we can say things more loudly than we have in the past. Some people would like us to do more. There is a feeling that one of the strengths of the UK has been its system of corporate governance. We want to keep that competitive edge.'

One frequent criticism of big investors has been their reluctance to force changes in companies. This kind of cronyism needs to be broken down. Does Farnish agree?

She says carefully: 'I think it is easier sometimes for us at the NAPF to take the lead and speak out on standards we think should be followed than fund managers, who will often have conflicts of interest and may be doing paid work for those very companies where there may be a problem. So it puts the onus on us to do the right thing. I think you will see more from us in the future,' she says pointedly.

Would she take direct action if there was evidence of corporate abuse?

'Yes. We would certainly engage directly with the company concerned on behalf of the collective interests of our smaller members. Going forward, there will be more activity which isn't always necessarily visible. Often it is the quiet conversations behind the scenes which get results. These may be more effective than turning out in force at an annual general meeting.'

She thinks that board pay is a difficult issue. 'Being a non-executive is a responsible job. Some of the things we are asking puts more onus on them. We want them to be aware, put the time in, understand the business and make informed comment on executives' proposals. That is not something you can do by turning up at a board meeting now and then. But if you pay people too much, it is difficult for them to speak out and oppose. So I think you have to pay a reasonable amount, within modest bounds. You would not want them to be dependent on the income from a particular directorship.'

She says firmly: 'If someone holds more than five directorships, they should be able to give a very clear explanation as to how they can carry out that amount of work. Going beyond five would raise our eyebrows, unless there was a good reason.'

Farnish's climb from running a small department for Lewisham Council has been remarkable. After a degree in botany and science, she worked for the Countryside Commission in classy offices overlooking Regent's Park, before taking a career break to bring up her children - Sam, 26, Jack, 24, Harry, 21, and Hannah, 15. Farnish relished her work at Lewisham, running a support team for council members. But when one of her sons was mugged, she and her husband, a management consultant, decided to leave London. They moved to Cambridge where she became deputy chief executive of the city council.

'Fabulous quality of life, fabulous schools, everything on your doorstep. But it was so good it became a graveyard of ambitions.' So she moved back to London as consumer affairs director for Oftel, then run by Don Cruickshank.

Her next move was to the Financial Services Authority, where she was made director of consumer affairs. 'I was the only person with no background in financial services, so it was a bit lonely at first.'

She was involved in consumer protection, setting up new ombudsman and compensation schemes. Farnish sees herself as a consumer champion, not afraid to take an independent line. She has little doubts about the challenges she faces at the NAPF.

Many large employers have ditched final salary pension schemes for 'defined contributions'. These depend on stock market performance and pose big risks to the millions who will become dependent on them. She says: 'We need to be the leading voice in putting forward sensible workable pensions policy proposals that will be respected and listened to by the government. If we cannot come up with the answers, who can?'

She needs to reconcile the aspirations of pensioners with the financial reality facing companies in supporting costly final salary schemes.

'The government has imposed more burdens on pension schemes. I think it is very difficult to see how some of these are sustainable on the current level of employee contributions and with current retirement ages. Since final salary schemes were introduced they have increased from 5-10% of total payroll costs to 15-20%. I would like to see a more informed debate and more effort by companies in looking at the options and engaging with their workforce.'

That would be better than 'a kneejerk trend to go straight to closing final salary schemes, introducing a defined scheme for new starters and cutting employer contributions by more than half'.

She added: 'It is quite hard to defend the sort of changes done in an opaque way and not explained to people.'

The NAPF will publish a policy document on pensions next month.

Farnish says: 'It will be quite wide-ranging, radical even, it is not just fiddling at the edges. We are thinking long term. What we are suggesting may not be immediately palatable to the powers that be, but it is the best way forward for the country unless we want lots of people living in poverty.'

Though clearly a determined career woman, Farnish admits that 'getting away from work is my main preoccupation'. She throws an apologetic glance at her public relations adviser. Was that a gaffe?

She laughs. 'I have to admit I do like good holidays. I also like singing in my choir, although I missed the last rehearsal so they will probably throw me out.'